Penny Stock Firm Under Investigation Folds

A penny stock firm accused of defrauding thousands of customers has shut down its operation, citing the financial crunch of a flood of investors seeking their money back.

Power Securities Corp. announced that it was terminating all retail sales activities nationwide.

The closure of the Las Vegas office comes less than a week after New York Atty. Gen. Robert Abrams accused Power of defrauding thousands of investors of millions of dollars.

Mark Behringer, Las Vegas branch manager for the firm, said Power was closing because it could not meet net capital requirements.

“There was a rush on the bank,” he said. “A lot of stock came back at us. We couldn’t meet net (capital) and we had to close our doors.”

The Nevada Securities Division urged Power customers to make arrangements immediately to have their accounts transferred to other brokerage firms or request delivery of their funds and stocks.

“Our agency will be monitoring the situation closely and will take further action if the situation warrants,” said Sherwood Cook, deputy secretary of state.

Power attorney Gilbert McSwain said in a statement that the run by investors probably was triggered by Abrams’ actions against the company and “not the public’s lack of confidence in the penny stock market.”

Penny stocks are low-priced, high-risk securities sold over the counter. They are not listed on any major exchanges.

A New York judge last week temporarily barred Power from soliciting business in the state after Abrams said records showed Power had manipulated stock prices, created artificial markets and marked up stock prices by 100% or more. A Feb. 22 hearing in the case is scheduled.

Power Securities was founded in 1987 by two Rochester, N.Y., natives, Richard T. Marchese, 29, and Eric G. Monchecourt, 27, and Orville L. Sandberg, 62, of Denver.

It employed 106 salespeople in four offices in New York state. An additional 400 around the country are registered to solicit business in the state, Abrams said. The company said it had 1,300 employees nationwide.